Court: ‘Advertising Injury’ Includes Promotional Techniques

The U.S. District Court for the Western District of Kentucky (which, by the way, is among the federal courts that don’t provide copies of all opinions on a website readily accessible to the general public) has decided that promotional techniques can constitute "misappropriation of advertising ideas or style of doing business" under the "advertising injury" coverage of a Commercial General Liability policy.  Specifically, the court was talking about the serving of garlic butter, which one pizza chain claimed was its idea that another pizza chain, started by former employees, had ripped off, along with other ideas like toppings poking up through the cheese and the taste of the pizza sauce.  The case is Pizza Magia International, LLC v. Assurance Co. of America, 2006 WL 2241333 (W.D. Ky. August 3, 2006).  

In making its ruling, the court joined other courts that have criticized the Sixth Circuit’s Advance Watch case, 99 F.3d 795 (1996), which concluded that "misappropriation of advertising ideas or style of doing business" does not refer to a category or grouping of actionable conduct that includes trademark or trade dress infringement.   The majority of courts have found that trademark and trade dress infringement can indeed constitute advertising injuries under a CGL, depending on the language of the policy and the underlying facts, of course.

The district court also found sufficient nexus between the misappropriation and the injuries suffered.  Advance Watch had said that it was not the appearance of infringing images in a catalog that caused the injuries, but rather the appearance and shape of the product itself, a conclusion that has struck more than one person as a fairly brazen piece of sophistry.  The district court repudiated that line of thinking, but went pretty far the other way, saying that the act of selling is actually a "technique" that in itself constitutes advertising. 

Although the court granted summary judgment on this issue, it found material issues of fact on the loss-in-progress doctrine, and the case will proceed to resolve the question of whether the insured was aware of a threat of loss so immediate that it can be said the loss was in progress when the policy period began.


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